Pew report: Nine states face budget crises of Californian magnitude

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Nov 12 2009

A new Pew analysis, titled "Beyond California: States in Fiscal Peril," warns that nine other states are also on the brink of economic catastrophe and urges state legislatures to act quickly, The Associated Press reports. While Michigan slashed health care spending, Arizona is in such a dire fiscal situation that officials have considered mortgaging state buildings to temporarily fend off disaster. The other states are Florida, Illinois, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin.

"Historically, states have their worst tax revenue year soon after a national recession ends. At the same time, higher joblessness and underemployment mean more people need government-sponsored health care and social safety-net programs, further taxing state services," the AP reports. "In reviewing why some states are suffering more than others, Pew found that the 10 states tend to rely heavily on one type of industry, have a history of persistent budget shortfalls or face legal constraints making it extra difficult to implement major changes, such as tax increases" (Lin, 11/11).

The states face crises because of "widespread foreclosures, rising unemployment and poor financial management," The Wall Street Journal reports. States have recently ordered additional - even larger - budget cuts, including a 20 percent scheduled cut in Michigan that would begin Oct. 1, 2010 and comes on the heels of recent 10 percent cuts. "The U.S. Conference of Mayors said last week that cities faced drastic spending cuts without additional federal aid" (Merrick, 11/12).

The Detroit News: "The report notes that Michigan will have lost more than a million jobs by the end of this decade, more than a third of those this year, and 268,000 of them in the auto industry. The state's 15.3 percent unemployment rate is highest in the nation" (Hornbeck, 11/12).

The Philadelphia Inquirer: "Though (New Jersey's) property taxes are the highest in the nation and it has increased sales and personal income taxes to generate more revenue in recent years, the Garden State still faces one of the biggest budget shortfalls, the study said" (Lu, 11/12).

This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.